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"Your opponent cannot fold if you do not bet or raise." –Abdul

There’s no shame in walking away

Posted on | February 14, 2010 | 1 Comment

Apparently there’s a growing number of people strategically defaulting on their mortgages. Or, at the very least, there’s a growing fear that this is happening. For some commentators, this is a sign of low moral fiber, that the strategic defaulters are somehow breaking their word, losing their honor, etc.

Bullshit.

Housing loans are not based on the belief that the borrower will pay the money back because his honor is at stake. They are based on a contract, which spells out exactly what the lender can do if the borrower stops paying back the loan. The lender can choose to take the house and sue the borrower for the difference between the house’s value and the loan amount (unless it is a non-recourse loan).

There’s also this refrain of unease that not only is the decision to default immoral, but it’s just too easy and trivial to do. That the borrower somehow escapes punishment-free for buying too much house or getting a terrible loan.

But losing your home and getting sued is not a trivial thing. Not to mention the massive hit your credit score will take. For the borrower who defaults, it means that credit will either be unavailable or offered at exorbitant rates. Moreover, employers and landlords often do credit checks prior to hiring or renting, which will further limit the borrower’s options.

Nor is it necessarily easy! The lender has the option to take the home, but no obligation to do so. If there’s a glut of inventory in a particular submarket, a backlog of defaults to process, etc., the lender can choose to send nasty letters to try to get the borrower to pay, but may hold off on actually seizing the property. In the meantime, the borrower still owns the property and any liabilities that go along with it.

Finally, there are those that mention other effects of the foreclosure, such as declining house values and higher borrowing costs within the submarket or economic cohort. But aren’t these effects the natural outcomes of a market? We are coming off a 7 year bubble; houses are going to go into foreclosure, prices will drop, costs will increase, and to expect anything else is insane.

The bottom line is that the decision to take a loss, just as the decision to purchase, should be evaluated rationally by the individuals involved. There are a lot of things to consider beyond the value of your house, the amount of your loan, your monthly income, and the monthly expenses, but morality is not one of them.

Category: General, News, Politics
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What price for safety?

Posted on | December 29, 2009 | 2 Comments

I don’t really have a strong opinion about the latest proposals to keep us safe from terrorists on airplanes.

However, I thought it might be worth noting that according to the NHTSA’s Fatality Analysis Reporting System Encyclopedia, there were 37,261 traffic fatalities in 2008. For the prior 14 years, this number was north of 40,000 annual fatalities.

As far as I know, there hasn’t been much discussion about these numbers. Maybe it’s because our fatalities per 100 million vehicle miles traveled has been dropping over time, and we think that having fewer than 2 fatalities per 100 million vehicle miles traveled is an acceptable loss.

Could we apply this acceptable loss rate to air travel and reap the benefits of the recovered productivity?

Or should we strengthen our traffic laws and their enforcement so that we get traffic fatality numbers below the omg threshold?

Category: News

Piss off the music industry

Posted on | September 18, 2009 | 2 Comments

For those of you who still have extensive CD collections, you can probably piss off the music industry by ripping all your CDs in a high quality format (e.g., FLAC) and then giving them to your local public library as a tax-deductible donation. Yesterday I read that ASCAP and BMI want to be paid for 30 second song samples, and it occurred to me that the public library has some pretty well established rights to let patrons borrow books, music, and videos for free (zomg!). Any attorneys want to chime in on this?

Category: News

Black Friday

Posted on | November 30, 2008 | No Comments

If shopping is our religion, then this is our Hajj:

NY Times: Wal-Mart Employee Trampled to Death

The throng of Wal-Mart shoppers had been building all night, filling sidewalks and stretching across a vast parking lot at the Green Acres Mall in Valley Stream, N.Y. At 3:30 a.m., the Nassau County police had to be called in for crowd control, and an officer with a bullhorn pleaded for order.

Tension grew as the 5 a.m. opening neared. Someone taped up a crude poster: “Blitz Line Starts Here.”

By 4:55, with no police officers in sight, the crowd of more than 2,000 had become a rabble, and could be held back no longer. Fists banged and shoulders pressed on the sliding-glass double doors, which bowed in with the weight of the assault. Six to 10 workers inside tried to push back, but it was hopeless.

Suddenly, witnesses and the police said, the doors shattered, and the shrieking mob surged through in a blind rush for holiday bargains. One worker, Jdimytai Damour, 34, was thrown back onto the black linoleum tiles and trampled in the stampede that streamed over and around him. Others who had stood alongside Mr. Damour trying to hold the doors were also hurled back and run over, witnesses said.

These two must have watched too many John Woo movies:

LA Times: 2 gunmen kill each other in shootout at Toys R Us in Palm Desert

Most shoppers headed to the Toys R Us in Palm Desert on Friday morning clutching their “door buster” ads and their shopping lists. At least two men walked into the busy store armed with their guns.

Instead of the usual frantic chaos on Black Friday, the year’s busiest shopping day, mayhem erupted in the electronics department about 11:30 a.m., leaving two men dead in a gunfight and crowds of shoppers ducking for cover.

Joan Barrick, 40, of Desert Hot Springs said she was buying a Barbie Jeep for her daughter when two women started brawling. As the women swung at each other, the men they were with also started arguing.

The younger of the two lifted up his shirt and flashed his handgun, pulling the grip from his baggy pants pocket. The other man yanked out his own handgun and started chasing him down the aisle and firing, witnesses said.

Barrick hid behind a stack of DVDs and recited the Lord’s Prayer. “If I’m going to die, I need to make peace,” she said. “A lot of people were crying. I was crying. We were all very, very scared.”

As the two men ran shooting through the aisles, shoppers dumped their purchases. LaToya Jenkins, 20, had already bought a remote-control bike. She dropped it and ran. Others left behind shopping carts full of the bargain-priced toys they had come in search of.

Several witnesses saw the gunmen clearly. Some cried out warnings: “He has a gun!” and “¡Pistola! ¡Pistola!” Barrick was so close she could see the smoking gun.

…

Riverside County sheriff’s officials declined to release the names of the dead men, whose bodies were found near the front of the store. Police retrieved handguns on the floor near both of them.

“These guys ran into each other, they squared off against each other, they killed each other,” said Sheriff’s Capt. Daniel Wilham. “It’s a miracle that these were the only two people killed, given it was a crowded toy store.”

It’s all so disgusting and funny at the same time.

NaBloPoMo 30

Category: News

Ring of Fire

Posted on | November 15, 2008 | No Comments

Four or five counties in Southern California are on fire. A little unusual this late into the year.

NaBloPoMo 15

Category: News
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